Advisers struggle to provide the full range of services ultrawealthy clients need

Multifamily offices try to win the loyalty of multigenerational families of clients by offering a full menu of services

Oct 11, 2015 @ 12:01 am

By Trevor Hunnicutt

When Stephen Miles and his business partner, Drew Adams, look back at their earliest days as financial advisers, they realize how much their approach to clients has changed.

Back then, it often involved “doing enough planning to sell them a product” and then moving on to the next client, according to Mr. Miles.

But as they started working with more clients who were owners of family businesses, they found that approach just wasn't going to work. Those clients needed far more complex, ongoing advice.

Mr. Adams said not all wealthy family business owners have access to the accounting, advisory and consulting services that larger businesses and ultrahigh-net-worth individuals enjoy.

“We saw a vast void in the market,” said Mr. Adams, who with Mr. Miles now operates a firm called Addicus in Oxford, Miss., that has 12 family office clients and $650 million under advisement.

At first, Mr. Miles and Mr. Adams were unsure how to reorganize their practice to accommodate their richer clients with family offices. The partners feel the financial advice industry has not yet come up with a best practices playbook for advisers running multifamily offices. In fact, even finding a firm definition of the nebulous term “family office” that satisfies everyone is difficult.

“The marketplace has figured out insurance sales and wealth management,” Mr. Miles said. “The marketplace has not figured this out.”

Addicus is one of a group of advisers and related businesses — trust banks and accounting firms among them — that are transforming into multifamily offices. Cerulli Associates Inc. estimates there are 200 multifamily office firms, controlling $700 billion in assets. The goal: to win the loyalty of those multigenerational families by offering a full menu of services.

Multifamily offices are adding a variety of nontraditional services, from bill-paying to managing their clients' philanthropic ventures. Others are doing everything from providing oversight on hedge funds to fielding questions on yacht upkeep.


Their upscale makeover requires simultaneously managing a number of pressures and often involves restructuring their business. The advisers themselves need new skills and new talent on staff. With each new service they add, they must decide whether to provide it in-house or outsource it. They have to price their services competitively but profitably. And they have to learn to speak to a new type of client.

“There are a lot more firms out there who are potentially at this crossroad — do we stay the course and continue to do things the way we've been doing it, or do we expand,” said Alexandre Monnier, president of the Family Office Exchange, a group that provides services and support to family offices. “Sometimes it takes a trigger for people to realize it's actually a big strategic issue in front of them.”

The competition among service providers to attract wealthy families is intense. And while it's appealing to add more services, some growing firms find that those services are difficult to offer and it's hard to know how much to charge for them.

It wasn't easy for Addicus. Like many advisers, the firm started adding specialized services for just one prized client. It weighed in on real-estate and other investments, planned his estate and managed his other advisers. In between his frequent vacations around the world, the client checked in on how he wanted those matters handled.

The client was one the advisers desperately wanted, but they didn't know what to charge him. “We might not be too far off from minimum wage,” Mr. Adams quipped. The experience provided the firm a lesson it's taken to heart.

“You need to set your expectations with a client as clearly as possible,” Mr. Miles said. “Now the client has a full and deep understanding of the services and advice we're going to bring to the table.”

Mr. Monnier said advisers may be tempted to try to meet every need their clients have. But firms that bolt on additional services to meet the needs of a single client often find they've “compromised [their] entire business model.” He said those firms often find their profits sinking, not expanding, as they add services.

“These transitions can be quite challenging,” Mr. Monnier said. “There's definite potential upside. But there's also some risk along the way.”

Nonetheless, he said, wealth management firms are increasingly asking themselves how they can evolve to better compete for the business of wealthy families. It's a conversation to which Mr. Monnier brings a wealth of experience. His previous jobs have included marketing services such as private-jet rentals and long-term health counseling to the superwealthy.

In 2014, the Family Office Exchange established a working group, called the Integrated Wealth Advisor Council, for advisory firms to seek advice from peers and to share their experiences and best practices for this market. Addicus is a member.

So, too, is Greenleaf Trust. The Kalamazoo, Mich., advice firm's specialties include providing access to specialized investment opportunities, including currency-hedging investment strategies and private equity. The firm now serves four families in its multifamily office unit and manages more than $7 billion altogether.


One solution to the fee issue family office firms face is to move beyond the assets-under-management model that's become an industry standard for serving clients across the wealth spectrum. Greenleaf offers a flat fee for the specific set of services it provides each of its families. The firm revisits its retainer annually, according to the firm's chief financial officer, Michael Ruchti.

Addicus says it's moving to billing clients on “assets under administration,” a figure that may take into account the value of a client's total wealth, including assets the adviser doesn't directly manage.

Other firms charge itemized fees for specific services. In 2014, Cerulli found 42% of firms serving the high-net-worth market increased their fees by more than 1%.

The alternate billing methods don't just compensate advisers for nontraditional services. They can also give clients comfort about the specific value they get from that adviser. That's key for many family office clients, who often use multiple advisers. Service providers in the high-net-worth space have an average of 64% of total client assets. For multifamily offices and top-level registered investment advisers, the incidence is 74%.

“You don't have to be the primary manager on all those assets,” Mr. Ruchti said.

Once the relationships start, clients who came in with one set of needs then ask about how to solve others.


What do you think?

View comments

Recommended for you

Advisers on the Move

Upcoming Event

Oct 23


Women Adviser Summit - San Francisco

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


FPA's Shannon Pike: What's next for the financial advisory profession?

As we head toward 2019 and beyond, regulation and compensation will continue to dominate the headlines. Shannon Pike of the FPA explains.

Latest news & opinion

LPL rolls back recruiting policy aimed at driving more assets to its corporate RIA

LPL erases $50 million hurdle for new advisers to join so-called hybrid firms.

Don't be fooled by the numbers — the industry is in a dangerously vulnerable state

Last year's stock market gains helped advisers turn in solid growth in assets and revenue, but that growth could disappear in the next market downturn.

Divided we stand: How financial advisers view President Trump

InvestmentNews poll finds 49.2% approve of his performance, while 46.7% disapprove. How has that changed over the course of his presidency?

10 states with the most college student debt

Residents of these states have the most student debt when you consider their job opportunities.

Ex-Wells Fargo brokers sue for damages, claiming they lost business in wake of scandals

In a Finra arbitration complaint, two brokers allege that Wells Fargo's problems damaged their business.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print